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Aussie shares declined for a second day ahead of a Reserve Bank policy announcement as down-pressure from the banks outweighed gains in mining stocks.
The S&P/ASX 200 retreated 25 points or 0.35 per cent to 7136. The index cracked 7200 yesterday for the first time ever before fading to a loss of 18 points.
Woodside Petroleum and the big three iron ore producers advanced after crude hit a two-year high and ore prices rebounded almost 6 per cent. The financial sector fell further from yesterday’s three-year high.
What’s driving the market
The start of a new month typically sees end-of-month window dressing partly dismantled. Institutional investors who spruced up their portfolios by buying the month’s best performers in the final days of May unwound some of those positions as the new month commenced.
The market had weak leads for the first session of winter following public holidays in the US and UK, and declines on European markets. The pan-European Stoxx 600 fell 0.49 per cent overnight as German and Spanish inflation gauges flew past European Central Bank targets.
European declines kept a lid on US futures ahead of the resumption of trade tonight following the Memorial Day long weekend. S&P 500 futures eased five points or 0.11 per cent.
The Reserve Bank met this morning and was scheduled to release a policy update at 2.30pm AEST.
The dollar rallied following a morning of broadly supportive economic releases. The Aussie climbed 0.25 per cent to 77.62 US cents.
The housing market continued to run red-hot. CoreLogic’s Home Value Index climbed 2.2 per cent last month, following gains of 1.8 per cent and a record 2.8 per cent over the previous two months.
“You have to go back many a decade to observe as strong a 3 month period of dwelling price rises as we are seeing right now. The line between this being an economic positive and negative was likely crossed some time ago,” Alex Joiner, Chief Economist at IFM Investors, tweeted.
The national current account surplus increased a seasonally-adjusted $2.32 billion last quarter to a record $18.3 billion. Resources exports were the biggest contributor.
Building approvals declined slightly less than expected in April. Approvals eased 8.9 per cent, versus expectations for a contraction of around 10 per cent following surges through the first few months of the year. Corporate profits eased a seasonally-adjusted 0.3 per cent in the March quarter.
Consumer confidence took a hit from Victoria’s Covid outbreak. The ANZ-Roy Morgan weekly survey showed confidence dropped 2.5 per cent last week after the lockdown was announced. Victoria this morning reported nine new local cases in the last 24 hours, six of which were announced late yesterday.
Going up
A sharp reversal in iron ore lifted the big three producers. The spot price for ore landed in China bounced $11.10 or 5.9 per cent yesterday to US$198.75 a tonne. Fortescue Metals advanced 2.21 per cent, Rio Tinto 0.46 per cent and BHP 0.1 per cent.
Woodside Petroleum rose 1.24 per cent as oil burst through US$70 a barrel. Brent crude was last up 87 cents or 1.26 per cent at US$70.20. Santos gained 1.18 per cent. Oil Search added 0.55 per cent.
Nine Entertainment climbed 0.34 per cent to a three-month peak on news of a content deal with Facebook and Google. The media group will provide news video and articles to Facebook for up to three years. A five-year deal with Google also includes news content. Nine expects revenue from the deals to help grow publishing earnings by $30 – $40 million next financial year.
News of a rebound in demand helped lift shares in automotive software-as-a-service provider Infomedia 13.28 per cent. The company said it expected full-year revenue of $95-$96 million, thanks to a pick-up in organic growth since December.
Going down
The big four high-street banks extended yesterday’s reversal. ANZ sank 1.01 per cent, NAB 0.83 per cent, Westpac 0.72 per cent and CBA 0.33 per cent.
Toll road operator Transurban fell 1.44 per cent after announcing a boardroom reshuffle. Patricia Cross, Craig Drummond and Marina Go will join the board.
Other heavyweight drags on the market included Telstra -1.14 per cent, Macquarie Group -0.99 per cent, CSL -0.9 per cent and Afterpay -0.47 per cent. Coles shed 0.36 per cent. Rival Woolworths gained 0.44 per cent.
BetMakers’ fall from grace since launching an ambitious $4 billion bid for Tabcorp’s wagering and media business continued into a third session. Shares fell 11.16 per cent to their weakest in two months. The share price has collapsed from $1.60 last Thursday to a low of $1.02 this morning.
Other markets
A second day of modest declines on Asian markets saw the Asia Dow fall 0.05 per cent, China’s Shanghai Composite 0.78 per cent, Hong Kong’s Hang Seng 0.08 per cent and Japan’s Nikkei 0.6 per cent.
Gold climbed $9.70 or 0.51 per cent to US$1,915 an ounce.
